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Ukrgasbank Will Return to Profit Before Its Resale, Shlapak Says

PAT Ukrgasbank, the Ukrainian bank seized by the government in 2009, will post a profit this year, making it attractive before a possible resale to investors by 2015, said First Deputy Board Chairman Stanislav Shlapak.

The formerly private bank, now 93 percent-owned by the government, will return to profitability after last year’s net loss of 3.7 billion hryvnia ($460.3 million), Shlapak said in a March 5 interview in the Ukrainian capital Kiev.

The government took over Ukrgasbank in July 2009 after the global financial crisis that led to the demise of Lehman Brothers Holdings Inc. (LEHMQ) shook Ukraine’s banking system. The bank has shown profits in the past two months, the first since the state takeover, after it cut costs and added new clients.

“Last year was a breakthrough year for us” because of a new growth strategy, said Shlapak, 33. “The bank should be attractive for investors when the government decides to sell its stake,” perhaps in two to three years, “though it is not our decision, it is the decision of the owner.”

The last year’s loss was blamed on the accumulation of reserves, in line with international standards, he said. Profit in January totaled 42 million hryvnia, while February’s profit was as high as 25 million hryvnia, Shlapak said, as corporate lending totaled 13.4 billion hryvnia and retail lending was 2.9 billion hryvnia at the end of last year.

Ukrgasbank, which was the country’s 16th largest bank by assets as of Jan. 1, wants to increase the share of retail lending in its loan portfolio, said Shlapak. Its main clients include metal, chemical, agricultural companies as well as energy and railway, he said.

Retail Lending Goal

Eighty-percent of lending goes to corporate accounts, while 20 percent are to individuals, said Shlapak, who wants to increase the bank’s share of retail lending to at least 25 percent this year. Bad loans totaled about 6 billion hryvnia.

“Part of those bad loans, mainly for construction, may be redeemed in some period,” Shlapak said.

He sees the possible repayment of 3 billion hryvnia in 18 months, though the timing depends on legal procedures, and plans to keep the number of branches stable after cutting more than 100 in 2009 and 2010.

To contact the reporter on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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